In re Cuozzo Speed Technologies LLC Federal Circuit Argument -- The Patent Office Asks to Have Its Cake and Eat It Too

By Andrew Williams --

Last week, the Federal Circuit heard the first oral argument for the first appeal of an inter partes review ("IPR") final written decision for the first IPR ever filed (IPR2012-00001).  The IPR case caption was Garmin USA, Inc. (Petitioner) v. Cuozzo Speed Technologies LLC (Patent Owner), but the appeal was fashioned as "In re Cuozzo Speed Technologies LLC" because Garmin withdrew from the appeal.  As a result, the Patent Office intervened to oppose Cuozzo's appeal.  Of course, the specific facts and argument of this case are of the utmost importance to the patent owner.  However, it is the positions advocated by USPTO Solicitor that can be of the most use to any other party finding itself in this position.

The Office advanced three arguments at the hearing.  First, the Patent Office asserted that the decision to institute is both unappealable and unreviewable -- even if that decision goes beyond the boundaries set by Congress.  Second, the Patent Office defended its use of the broadest reasonable interpretation (BRI) standard as consistent with the legislative history and prior Federal Circuit case law.  Finally, the Patent Office explained why the denial of virtually every motion to amend has been proper, even though the patent owner's ability to do so was anticipated by Congress.

With regard to these last two arguments, to quote Judge Dyk (albeit with respect to a different argument), the Patent Office attempted to have its cake and eat it too.  During the argument, the Solicitor made two seemingly incongruent statements in back to back sentences.  This stark contrast reveals why the justification for the BRI standard cannot rest on the supposed ability of a patent owner to amend its claims.  First, in response to a question about the claim construction standard, the Solicitor said:  "The principle difference between these types of trials and a trial in a district court is that patentees can amend their claims, that is in the statute itself."  Then, when Judge Newman commented that amending claims is not so easy, the Solicitor said:

It is not so easy, your honor, and it should not be so easy because having a motion to amend granted by the Board means that's a claim in an issued patent.  There is no further examination.  There is no search of the prior art.  So the Board has done something that is entirely reasonable and has put the public on notice.  They have told the patentees -- "if you want to amend your claims, tell us why your new claim is patentable over what you know to be in the prior art."  Now, we don't think that's asking too much, particularly where if we were to grant that motion, the claim would become a claim in a U.S. patent.

The fact that these two positions could be expressed in almost the same breath demonstrates the apparent disconnect that the Office has with regard to these concepts.  Even though many of us commenting on these types of proceedings have already pointed out this apparent inconsistency, it was somewhat surprising to hear them both advanced in such quick succession.

It appeared that at least Judge Newman also recognized this inconsistency.  Moreover, she asked the question that has been on a lot of minds since the promulgation of the patent office rules -- if these proceedings are supposed to be a substitute for litigation (but easier, cheaper, and quicker), why should the construction of claims be any different in the two proceedings.  The Office responded to this concern by pointing out that the Federal Circuit has already decided that BRI is the correct standard.  The problem was that those prior cases dealt with other patent office proceedings, and not those established by the America Invents Act.

In trying to ascertain what the Court might do with respect to the claim construction standard, it may prove useful to pay attention to Judge Clevenger's line of questioning of Cuozzo's counsel.  He noted that the Patent Office established that standard based on its rule-making authority provided for in the AIA.  Even though Counsel pointed out that the claim construction standard was not one of the regulations enumerated in statute for which the Patent Office had authority, Judge Clevenger responded by asking whether the Office had authority to establish rules to determine whether there is a likelihood of showing that one or more claims are valid.  "Wouldn't you have to construe the claims before you could reach that decision," he asked.  Even though there is a distinction between the procedural requirements for the Patent Office to make a showing and the more substantive question of what standard to use to construe the claims, the Court may, unfortunately, just defer to the Patent Office on this question.

Decision to Institute

Most of the hearing was spent considering whether the Federal Circuit could review the PTAB's decision to institute the trial.  The Patent Office tried to suggest that this question was already settled.  However, as Judge Dyk pointed out, the prior opinions involved the review of the decision by the PTAB not to institute trial.  And, contrary to the Patent Office's position, it does not follow that the decision to institute is equally not reviewable.

Specifically, the issue on appeal was "whether the PTAB lacked authority to institute IPR for claims 10 and 14 on grounds of unpatentability not identified in the Petition."  Garmin's petition contained several grounds of unpatentability, including a 103 challenge of claim 17 in view of various prior art references.  Even though the petition did not also challenge claims 10 and 14 on these grounds, the Board instituted trial on these claims in view of this combination because claim 17 depended from both of these claims.  In other words, the prior art references were specifically identified in the petition in the specific combination, just not with respect to claims 10 and 14.

Cuozzo and the Patent Office relied on two different sections of 35 U.S.C. § 314 to defend their respective positions.  First, Cuozzo argued that 35 U.S.C. § 314(a) prohibits the Board from such action: "THRESHOLD.--The Director may not authorize an inter partes review to be instituted unless the Director determines that the information presented in the petition filed under section 311 and any response filed under section 313 shows that there is a reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged in the petition."  However, the Office pointed to 35 U.S.C. § 314(d) as prohibiting appeals as to the grounds of institution: "NO APPEAL.--The determination by the Director whether to institute an inter partes review under this section shall be final and nonappealable."

There was some discussion about whether § 314(d) merely prevented interlocutory appeal of decisions to institute (because in this case, Cuozzo did wait until after the Final Written Decision before appealing the decision to institute).  There was also some discussion about whether this section was only meant to apply to the decision not to institute (which is already settled law).  The more interesting observation, however, was the increasingly absurd hypotheticals that the Patent Office was required to claim as unreviewable in order to maintain a consistent stance.  In fact, the details of this case were rather simple -- the specific claims at issue were all challenged (albeit on different grounds) and the specific combinations of references were identified in the petition (albeit not for claims 10 and 14).  Judge Clevenger began by asking whether a decision to institute with respect to a completely different claim set not identified at all in the petition would be reviewable.  The Patent Office answered no -- such a decision would be unreviewable and unappealable.  This was the same answer given for every fact situation, even those contrary to the statute itself.  For example, the Patent Office believed that if it had instituted a Post-Grant Review (PGR) ten years after a patent issued, it would also be unreviewable (even though the statute requires that such a petition be filed within nine months).

The key to the Patent Office's thinking on this point came when the Solicitor was asked what the harm would be if the Federal Circuit reviewed these decisions to institute.  In response, it was made clear that, regardless of what happened during the institution decision, the Patent Office subsequently made a determination that the claims should never have issued.  If the patent holder is therefore able to escape cancellation on "procedural" grounds, the entire year would have been for naught, according to the Office.  This may sway the judges for the question presented here, but it does not explain the "slippery-slope" hypotheticals presented by the Court.  Based on the questioning, it may well be that a majority of this Court will let the decision to institute stand in this case.  However, they may reserve for the future how to resolve the harder questions, if and/or when they are raised.

Comments

[Paul Cole]

There is a strong public interest that claims of unjustified scope should be held invalid and uncertainty for the public should be removed. There is an equally strong argument that subject matter disclosed in a patent specification which is truly novel and inventive and which has been disclosed to the standards required in 35 USC 112 should be enforceable.

For those reasons patentees have been permitted to amend their claims in the UK for well over a century, and in the EPO from its inception. Holding claims invalid and then denying the opportunity to make validating amendments is a denial of justice.

The well-known buzz-word broadest reasonable interpretation all to frequently degenerates into broadest unreasonable interpretation. There is a middle path which must surely be preferable: correct interpretation according to the file record and the evidence. Application of broadest reasonable interpretation accompanied by denial of amendment are logically inconsistent positions, and an inability to perceive that fact indicates the "normalization of deviance" (Janet Vaughn, the Challenger Disaster) to which large bureaucratic organizations are unfortunately prone.

This decision will be pattern-setting and will have world-wide implications. Hopefully the Federal Circuit will appreciate the point and hand down a constructive decision.

[Skeptical]

Would now be a good time to remind everyone that the construction of the AIA was deliberately chosen to NOT have a "survival clause?"

If one part of the AIA falls, the entire AIA falls.

Someone had studied the Korean Chaebol effect...